I want to be my own purchasing real estate agent

Factual Questions
1

Two of my neighbors have recently listed their homes for between $350k and $400k. My SO and I were talking about that (and hoping they get it) and we realized that at the standard 6% realtor rates around here, that’s between $21k and $24k. Wow.

What portion of a standard 6% sales fee goes to the buyers agent, as opposed to the sellers agent? If I found the house of my dreams, without the use of an agent, could I act as my own agent, hire a real estate lawyer to makes sure all the paperwork was in order, and claim that percentage for myself? I’m sure I’d have to pay income taxes on that, but it might well be worth it.

2

Well, you can’t actually claim the commission unless you’re a licensed agent or broker. It can be a negotiating point, though–the seller should be willing to sell for a lower price if they won’t have to pay commission to your agents.

Standard breakdown is 1.5% each for the buyer’s agent, the buyer’s broker, the seller’s agent, and the seller’s broker. I don’t have much direct experience in this, but I’m told that the broker’s percentage is really worth it, and it’s hard to get a broker to work with other than enlisting their agency …

3

The commission is split between the buyer’s agent and the seller’s agent. So in your scenario, the buyer’s agent would get 3% and the seller’s agent would get 3%. How much of that goes to the respective broker depends on the relationship that the agent has with the broker.

If you do not use an agent, it’s not that you can claim the commission for yourself but it would be that much more money that you get to keep as profits from the sale of the house.

4

In most places, under the listing agreement, the 6% commission is owed regardless of whether the buyer is represented. So, the seller’s agent would have to agree to reduce its commission to accomplish what you’re trying to do. On the bright side, this approach would mean you don’t have income. Whether it’ll work is another question. Frankly, I’m not optimistic. Most agents I’ve met are very by-the-book on the formalities (it’s how they’re trained). Unless this is a “done thing” in your locale, don’t expect much. Though goodness knows is doesn’t hurt to try.

5

What if I went out and got myself licensed. Can you do that independently? Can I be a licensed agent who doesn’t actually work for anyone, and really doesn’t actually work?

I’m thinking, take the classes, get the license, save myself and my friends 3% on all home purchases, as long as they are willing to do the legwork themselves, to find the house they want.

Things like title searches, home inspections, filing fees are already extra charges on my closing costs, and can done through local companies, usually the same ones the real estate agents use, and through a decent real estate lawyer.

$9,000+ (3% of a $300k price) just seems like an aweful lot of money to spend to have someone show me houses for 2 days, and to act as a go between for me and the sellers agent. Between my local friends and I, we seem to buy a house every couple of years.

Can anyone who is in the industry tell me what my buying agent does that justifies that cost, because maybe I’m missing something.

6

I’m in the process of buying a house using a buyer’s agent (“in escrow” is the term I think; closing Friday the 13th of April!). Here’s what my buyer’s agent has done:

  • spent three separate half-days showing houses, calling for lock-box combinations if we saw something interesting by driving by, and making appointments for properties we had researched ahead of time
  • giving us heads-up about different neighborhoods and house styles
  • writing up the contract and submitting it to the sellers/selling agent, and passing the paperwork back-and-forth during final negotiation
  • finding a building inspector, arranging for the house to be open and was there for the inspection
  • ditto for the mortgage appraiser
  • ditto for the insurance person
  • arranging up the closing company time (here it’s at a title company)

I think we’ve got our money out of her, especially since the seller pays her commission. The house is in a city three hours away, but even if it was local, it was worth it.

7

You would have to check your state’s real estate laws. I know in New Jersey you have to have your license registered with a licensed real estate broker, who has to have an office. Some brokers will hang your license even if you don’t want to use it, but ONLY a licensed broker can collect a commission. The broker/agent commission split is negotiated between the two.

Check your local real estate commission’s website and talk to an area broker to see what’s up with your state.

8

The generaly practice in downstate New York is that the seller enters into an exclusive listing agreement with a broker and then lists and advertises the property. The agreement will set the total compensation for the broker, commonly 6%, but often reduced to 5% or sometimes less, particularly on high-value properties.

If another broker introduces the property to the buyer, the custom is that the listing broker split the brokerage commission with the introducing broker 50/50. If, however, the listing broker produces the buyer him- or herself, the listing broker is entitled to the entire commission. If a buyer responds to an advertisement or an open house sponsored by the listing broker (without the assistance of another broker), the listing broker is considered to have produced the buyer, and is entitled to the entire commission.

Most listing agreements provide that the listing broker is entitled to a commission even if the buyer is procured by the seller or otherwise, though it is uncommon (but not unheard of) for sellers to sometimes write general or specific exceptions into the the agreement.

In New York each brokerage firm has only one individual who is the “broker”, and legally responsible for all transactions. The others who are commonly thought of as “brokers” are licensed as either associate brokers or salespersons, and work under the authority of the broker. The commissions are usually split between the broker (for the brokerage firm) and the salesperson/associate broker under an arrangement separately negotiated between the firm and the individual (sometimes 50/50, sometimes not).

It is relatively easy to get a salesperson’s license if you take the courses, pass the test and are sponsored by a broker. Further, to work as a licensed salesperson, one must always be sponsored by a licensed broker. To become a licensed broker (including associate broker), one must have worked as a salesperson for at least one year, among other requirements (unless you are an attorney). As such, it is virtually impossible in New York to become licensed as a broker for the purposes of a transaction (unless you are already a lawyer). There are also laws about splitting fees with unlicensed individuals, so being the licensed broker for friends who want to do their own legwork would probably not work. If someone is a licensed as a salesperson is purchasing for him- or herself, her or she can relatively easily get his or her broker (or brokerage firm) on the deal as the introducing broker, and then the commission can be split as agreed between the broker (or firm) and the salesperson, but that depends on the willingness of the broker to work out a favorable split and won’t work for purchases made for others. Here’s New York’s FAQ on the subject of licensing.

If you were in New York, it would be likely to be difficult to capture part of the listing broker’s commission unless you are already licensed as a broker or salesman. Your mileage may, of course, vary, and if you have any questions about this general explanation, you should consult your own attorney or real estate professional.

Good luck.